Aggregation Wars, Part 3: The Opposition

In last week’s episode of Aggregation Wars, we covered the big banks’ lobbying effort to stop aggregation. This week, we profile the fintech companies who are fighting for aggregation and for the consumer’s right to access their financial data.

FinTech companies are forming an opposition party in the battle over aggregation. Some are familiar, and others are behind-the-scenes. Here’s who’s defending your data ownership:

The Companies You Know

Mint, Acorns, Digit, Kabbage, Betterment. These fintech companies offer direct-to-consumer financial products like robo-advised brokerage accounts, automated savings tools, and loan-refinancing platforms. Some of these companies are financial institutions of their own while others, like Digit, are not. None of them compete directly with banks, but all of them require access to your banking data. For example, Digit analyzes your spending habits to help you save for custom goals like a vacation. Without open access to customer banking data, these tools could not exist.

The Companies Backstage

Behind each of these shiny new apps, there is a network of technology providers who build “pipes” that connect to financial institutions: Yodlee, Plaid, Quovo, Intuit. Without stable, secure API connections to the big banks, these aggregation technology providers are stuck using more primitive (and less secure) screen-scraping technologies to grab user data. Clearly, these companies want open access to consumer financial information.

Joining Forces

The FinTechs you know and the ones you don’t are joining forces to fight for consumer data access. This month, they formed the CFDR, or the Consumer Financial Data Rights Group. The group’s goal is to convince the CFPB that secure data access is a win for all parties: FinTechs, banks, and consumers. More broadly, the group supports collaboration between banks, regulators, and FinTechs that will help them align around common goals: building a secure financial ecosystem that benefits and protects the consumer.

While “FinTech” might yield visions of nimble, garage-style startups, there is big money behind these growing companies: global FinTech investment reached $22 Billion in 2016, and that’s from Venture Capital alone. Still, it’s nothing compared to the deep pockets of the big banks. Hopefully, the CFPB will realize the potential of free-market competition for financial products, and the FinTech Industry’s suggestions will be received well.

What’s next?

The CFPB will continue to accept letters while it weighs the pros and cons of open access to financial data. As you read this, the ABA is working to discourage aggregation practices, and the FinTech-backed CFDR is working to improve them. You have until February 14th to contribute.

Next Up: Europe and Beyond

In the next installment of Aggregation Wars, we look take a look at the open API initiatives in Europe, The UK, Singapore. If the US is to remain competitive on the global fintech front, we will need to catch up to these countries with consumer-first regulations that encourage innovation, put security first, and lay the tracks for a more inclusive, consumer-friendly financial services architecture.